Conservative Antitrust is Soulless
Fairness is what matters, and a new paper I co-authored with my colleague at the Open Markets Institute puts an important aspect of antitrust law in proper context.
In February, Tara Pincock (my colleague at the Open Markets Institute) and I released a new paper examining fairness and the antitrust laws. In this post, I want to briefly review our paper and explain why I believe it is an important contribution to the antimonopoly movement.
—
As readers of this Substack likely know, historically, antitrust focused on aspects of a firm’s power and its inherently adverse effects on our society and democracy. Since the 1970s, however, antitrust has been a field dominated by conservative economists, academics, and jurists who have worked in tandem over the last 50 years to reconstruct the law to make it more difficult to understand and enforce.
A critical component of the coordinated attack on antitrust was to transform the subject from an area of law that promoted fairness and economic liberty to one that is primarily concerned with a narrow conception of economic efficiency (known as allocative efficiency), generally limiting its application to conduct that interferes with prices for consumers from being as low as possible. In stripping antitrust of its concern for fairness and economic liberty, conservatives have reconstructed the law to be only concerned with raw numbers, not with people.
Due to the efforts of Chicago schoolers and their marginally more refined but no less culpable post-Chicago relatives, antitrust litigation now requires parties to rely on esoteric and narrowly defined econometric calculations of asserted price increases or output reductions to determine whether a plaintiff’s lawsuit succeeds. The results have been devastating. Federal enforcement collapsed in the 1980s. The Supreme Court imposed numerous exceptionally high barriers on private enforcement. Antitrust enforcement now retains a strong presumption against enforcement, and little attention is given to the moral or ethical considerations of a particular lawsuit and what the outcome should be. Simply put, conservatives have worked for half a century to make antitrust technocratic and soulless.1
These aren’t mere assertions. For example, modern antitrust jurisprudence maintains that vertical restraints (market practices that include one firm restricting another firm that’s located at a different segment of the supply chain) should be legal in nearly all circumstances. Vertical restraints allow Uber and franchisors to control workers’ pay, work schedules, and working conditions without incurring legal liability for any incidents that occur (like injuries). My Open Markets colleague Brian Callaci calls this circumstance “control without responsibility.” Moreover, these companies' vertical restraints impose nearly insurmountable hurdles on workers creating a union.
While technically these restraints are not per se legal under the antitrust laws, they functionally are because judges review them under the rule of reason, an analytical framework that I have previously argued needs to be wholly discarded. Michael Carrier, a professor at Rutgers Law School, has empirically shown (in three separate papers since 1999) that federal courts use the rule of reason to bless nearly all conduct reviewed under it.
As I describe in a recent law review article, another area where the Chicago School made significant progress concerns a critical aspect of antitrust litigation involving the process of defining relevant markets, where litigants battle it out to construct a market from which the effects of the conduct and the market shares of the firms are evaluated. While the easy-to-understand qualitative method (commonly known as the Brown Shoe process) is still on the books, practitioners, scholars, enforcers, and courts eschew it and greatly prefer—or in some cases exclusively use—an econometric method to define a relevant market, which, among other issues, requires the use of expensive economists and imposes unnecessary technocratic barriers to antitrust litigation.
Repeatedly, Chicago and Post-Chicago scholars express a clear disdain for fairness. Judge Frank Easterbrook made his thoughts quite clear in a dissenting opinion he authored in 1986. He said:
Who says competition is supposed to be fair?...‘Unfair’ competition is still competition, too ruthless for someone's sensibilities… Fair competition is tempered competition. To say that conduct is unlawful because it bruised a rival producer…is to turn antitrust law on its head.
Phillip Areeda and Donald Turner, widely considered some of the founding fathers of embedding neoliberal economics into antitrust enforcement, stated in their leading treatise that as a goal of antitrust policy, “fairness is a vagrant claim applied to any value that one happens to favor."2
Herbert Hovenkamp, a leading scholar in antitrust, stated in his book The Antitrust Enterprise: Principle and Execution that:
Market intervention must be justified and the justifications by and large are not moral ones. Punishing unfair behavior is not antitrust’s role. Its purpose is to make markets perform more competitively, and intervention is justified only when it moves us toward that goal.3
Easterbrook’s, Areeda’s, Turner’s, and Hovenkamp’s statements reflect a deep-rooted ideological commitment to stripping morality from competition law, a stance Tara and I directly contest in our paper.
To obtain some insight into why those who support these assertions are wrong, they should take a moment and talk to a working-class person and try to argue to their face that a non-compete shackling them to a hostile workplace is justified because it promotes “consumer welfare,” or that it’s acceptable for people’s lives and communities to be destroyed by private equity because mergers are “efficient.” I wish them the best of luck. This reveals a basic truth: the problems with their anti-fairness stance are not difficult to identify.
Consider that market competition does not involve winning by hook or by crook. A business owner cannot burn down their rival’s factory, or engage in defamation or deception to beat their competition. Instead, the law establishes a boundary around methods of competition that are lawful and instructs firms to use those practices to succeed.
All of this leads to the central thesis of our article: that fairness is an intrinsic and inseparable aspect of the antitrust laws. In our paper, we make the following arguments:
“Competition,” without context, has no definitive boundaries and is often asserted as a well-established truism and universal societal good.
The antitrust laws categorize lawful and unlawful conduct.
As a result of this determination, the antitrust laws have intrinsic moral and ethical connotations that impose a standard of fairness on firm conduct—that is, firms are required to engage in “fair competition,” not competition at all costs.
Sports, while imperfect, serve as a helpful analogy to understand why fairness matters and how to begin defining the contours of the specific types and methods of competition that antitrust laws should promote or condemn.
Fairness as an aspect of antitrust law and a necessary factor for determining whether a particular method of competition is lawful is a matter of public welfare, benefiting not only rival firms but also consumers and workers, and is fundamental to facilitating a democratic society.
We are submitting our paper to law journals in the hope that it will help reinvigorate antitrust’s normative foundations, directly challenge the erroneous arguments made by our intellectual opponents, and advance efforts to reincorporate fairness into all aspects of antitrust litigation and the evaluation of whether specific business practices are unlawful. Simply stated, fairness is not a fringe concern; it is central to what antitrust was always meant to do. Reinvigorating antitrust’s normative foundations is not just about legal reform. It is about restoring a sense of moral purpose to a field that has been drained of it.
The current version of the paper can be downloaded here.
Thanks for reading.
—
Image Credit: Tama66 via Pixabay.
I am hardly the first one to state this circumstance. E.g., Harry First & Spencer Weber Waller, Antitrust’s Democracy Deficit, 81 Fordham L. Rev. 2543, 2559 (2013) (“[The current] antitrust system [is] captured by lawyers and economists advancing their own self-referential goals, free of political control and economic accountability.”).
1 Phillip Areeda & Donald Turner, Antitrust Law: An Analysis of Antitrust Principles and their Application ¶ 109a, at 21 (1980). William G. Shepherd, Donald Turner and the Economics of Antitrust, 41 Antitrust Bull. 935 (1996) (“Few economists or lawyers have pursued as ambitiously as Donald Turner the effort to make antitrust more economically rational. Much of this work was done with Phillip Areeda, but Turner's economics Ph.D. made him the economics cutting edge in that distinguished pair.”).
Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution 7 (2005).